Daily Tech Snippet: Wednesday, July 22

• Archived snippets are here, and MP3 versions are here

• Apple Profit Up 38%, but iPhone Sales Disappoint Wall Street: Apple reported double-digit increases in sales and profit for its fiscal third quarter, a rate of growth that is highly unusual for a company of its size. Yet the results still fell short of estimates by Wall Street analysts, who are accustomed to Apple blowing past projections and had been predicting sky-high sales of iPhones and the company’s brand-new Apple Watch. In total, Apple reported a 38 percent increase in profit, to $10.7 billion, from a year ago, with revenue surging 33 percent to $49.6 billion. Sales of the company’s biggest revenue and profit generator, the iPhone, soared 35 percent to 47.5 million units. IPhone sales faced some tough sequential comparisons. The 47.5 million units sold in the quarter was below the roughly 50 million that analysts had calculated Apple would sell, and was also down from the 40 percent growth in the previous quarter and the 46 percent growth two quarters earlier. Still, the rate of growth exceeded the 13 percent increase in the same period a year ago. And while Apple did not share numbers on sales of the Apple Watch, which began selling in April, analysts on Tuesday calculated that the company had sold between 1.5 million and three million watches, far less than the three million to five million watches they had predicted ahead of Apple’s earnings report. Apple’s sales in the quarter were fueled by overseas buyers, with international regions accounting for 64 percent of the quarter’s overall revenue. Sales in the greater China region, one of Apple’s prime growth areas, more than doubled to $13.2 billion. The company also reported healthy growth for its Macintosh computer business. Apple sold 4.8 million Macs, up 9 percent from a year ago. Shares were down 7% in after-hours trading.


• Jet.com Will Launch With Amazon Prices Front and Center: Jet, the new shopping site that launches on Tuesday, promises shoppers “the lowest prices on everything.” To hammer home the point, the online mall will compare its price with Amazon’s price on every one of its product pages. As a way to prove its marketing promise, Jet tested its service with some customers who were given early access by showing its prices against those found on multiple competing websites. But after some people were confused by the appearance of the various competitors, Jet has decided to show its prices against just one competitor, Amazon, which typically has very low prices. “So it’ll be very easy for customers to understand that savings means savings compared to Amazon,” Jet CEO Marc Lore said of the changes in an interview on Monday. “They’re clearly the dominant player, so they’re a great reference point.” Lore said about 90 percent of Jet’s product listings at launch will show Jet’s discounted price compared with Amazon’s lowest price for the same item. The remaining 10 percent of Jet product pages will be updated with Amazon price comparisons over the next two months. There are some caveats. While Amazon often has the lowest prices, it doesn’t always. When that’s the case, Jet will discount the product below the lowest price found elsewhere on the Web, but will still show Amazon’s price for consistency’s sake, the company said. The Amazon prices also won’t factor in the fact that some of the products wouldn’t carry shipping fees for Amazon customers who pay $99 a year for Amazon Prime. Jet, meanwhile, charges $5.99 for orders under $35, while Amazon also charges delivery for orders of this size for non-Prime members. “If you have Prime, you’re not our target customer,” Lore said, explaining the rationale. “You’re getting video, you’re getting faster shipping. It’s a completely different animal.”


• More on the launch of Jet - Jet is here. Let the price wars begin.: After months of testing and tweaking, the e-commerce start-up Jet.com opened its digital storefront on Tuesday, marking the official kickoff of the company's ambitious effort to battle Amazon and Wal-Mart for budget-conscious customers. Jet is taking a new approach to pricing. Its algorithm doesn't simply look at the price of each individual item in your online shopping cart. It looks at all the items you want to buy, as well as your Zip code, to determine which retailer or warehouse can ship that unique combination of items to you the cheapest. Shoppers can only buy things on Jet if they've signed up for a $49-per-year membership. Ad Week reports that in this online store, viewing ads could lead to discounts as Jet.com is lowering bills wherever it can. It's a risky business model. Lore has to get Jet.com to $20 billion in revenue by 2020 to make the site profitable. That kind of revenue means it would have to become one of the most successful e-commerce players in the world. The only money Jet.com would make comes from the $50 membership fee users pay to access the savings, which average about 15 percent on everything from detergent to sofas. The site offers deeper discounts depending on variables such as whether a customer pays with a credit or debit card, whether the order can be filled with an efficient shipping route, and whether the consumer waves the right to return items. All these little options help whittle down the price of a basket of goods.


• A $7 Billion Charge at Microsoft Leads to Its Largest Loss Ever: An accounting charge wiped out Microsoft’s profit for the quarter, leading to its largest loss ever, the company said on Tuesday, making clear the cost of its missteps in the mobile business. The $7.5 billion accounting charge, stemming from Microsoft’s troubled acquisition of Nokia’s cellphone business, was disclosed by the company earlier this month, along with plans to eliminate 7,800 jobs, mostly in the company’s phone operations. While the accounting charge was on paper and will not diminish the company’s huge cash hoard, it was a psychic blow to Microsoft, one of the biggest money makers in tech. Investors, however, seemed to mostly look beyond Microsoft’s struggles in the phone market. They appeared to focus on two of the company’s most important businesses, Windows and Office, which showed some signs of weakness. Those were somewhat offset by strong growth in its cloud services business, Xbox games and Surface tablets. For its fiscal fourth quarter, which ended June 30, Microsoft said its net loss was $3.2 billion, or 40 cents a share, compared with net income of $4.61 billion, or 55 cents a share, during the same period last year. While the company’s stumbles in smartphones have shown the bruising downsides of the hardware business for Microsoft, it had success with other devices, including its Surface tablet, the revenue from which grew 117 percent, to $888 million. Revenue from its Xbox game business rose 27 percent. In total, Microsoft said it had nearly $2 billion in computing and gaming hardware revenue in the quarter. Revenue from Microsoft’s overall commercial cloud business grew 88 percent during the quarter, one of the brightest spots in its results. Microsoft’s shares fell about 4 percent in after-hours trading


• Yahoo Posts Loss, Despite Rise in Its Display Ad Business: Yahoo’s revenue in the second quarter rose 15 percent, the company said on Tuesday. But it spent heavily to achieve the gains, wiping out all of its profits and then some. For the quarter, Yahoo reported revenue of $1.24 billion, up 15 percent from the $1.08 billion it reported in the same quarter last year. But after deducting the share paid to partners, revenue was flat. The company posted a net loss of $22 million, or 2 cents a share, compared with the profit of $270 million, or 26 cents a share, it reported a year ago. Executives also warned that expenses would continue to be high through the rest of the year. “We are investing heavily to grow market share through traffic acquisition,” Marissa Mayer, Yahoo’s chief executive, said in a conference call with investors to discuss the results. Yahoo shareholders were unimpressed, sending the company’s stock down more than 1 percent in after-hours trading. Not that Yahoo’s core business — selling advertising — matters much to investors right now. Wall Street is far more interested in the fate of the company’s 15 percent stake in Alibaba, China’s biggest e-commerce company. Yahoo plans to spin off the holdings, worth more than $30 billion, into a separate company called Aabaco Holdings in the fourth quarter. The deal is designed to avoid incurring a capital-gains tax bill, but Wall Street analysts are concerned that the Internal Revenue Service will reject Yahoo’s argument that the spinoff should be tax-free.


• Targeted ads to drive mobile video business, Verizon CFO says: Verizon Communications Inc 's upcoming mobile video service will drive revenue with a combination of highly targeted ads, exclusive content and pay-per-view live concerts and sporting events, Chief Financial Officer Fran Shammo said in an interview on Tuesday. Most Americans own a mobile phone and Verizon is looking at offering video content to increase data consumption on mobile devices and grow revenue. The digital video service, which it expects to release this summer, is aimed at families and younger viewers who increasingly view content on mobile devices. The video service will be offered through a mobile app, and will include some free sponsored content, Shammo said.